Earlier this summer, FloQast hosted a panel discussion with our partner Tactical Cloud at the Culver Hotel. We invited three accounting leaders of hyper growth, Los Angeles based companies to share their experiences — both good and bad — implementing cloud accounting ERP (Enterprise Resource Planning) solutions for midsize and fast growing startup companies.
The companies represented — Thrive Market, Sugarfina, and Smartlabs — each use Oracle NetSuite for their ERP. Thrive Market is also a customer of FloQast’s close management software.
There were so many useful takeaways from the event that we couldn’t capture all of them in a single article. So here we present part one in a future two part series on the challenges and benefits of moving to cloud:
The Limitations of Desktop Technology
All three of our panelists felt the pain of desktop technology that limited growth and presented internal control risks.
Amy Pool, Thrive Market
Thrive Market is a 400,000+ membership community that uses the power of direct buying to deliver the world’s best healthy food and natural products to its members at wholesale prices.
Before making the switch to a cloud ERP, Amy’s team was using QuickBooks. One of her biggest concerns was the lack of controls. “As long as you had the password to log in, you could make any journal entry you wanted,” says Amy. “It’s very hard to monitor who’s making what entries and in a growing company — a startup where there’s so many things going on — you really need to be in control of what’s happening with your books.”
Amy continues, “We tripled in monthly revenue very quickly. We integrated NetSuite with FloQast in order to have a month-end close checklist that held staff accountable. With QuickBooks alone that was not happening. We were using a Google Sheet to manage our close. Anyone with the link could edit it, and that just wasn’t working. We really needed something more complex than a spreadsheet.”
Danny Coorsh, Sugarfina
Sugarfina is the ultimate candy store for grown-ups offering The Original Champagne Bears®, Rosé wine-infused gummy bears, and more cocktail-inspired candies. Founded in 2012, the store now has more than two dozen stores across the U.S. with more opening soon.
As the Senior Director of Operations at Sugarfina, Danny Coorsh felt a similar pain of visibility — in his case, more broadly over the whole organization. Even though Sugarfina was born out of the desire to bring a childlike sense of wonder to candy for grown-ups, it still takes a grown-up accounting system to run the business.
Danny says that his biggest problem before going cloud was that “we had extremely limited visibility to our financial performance. We had no idea what inventory each location had on hand, what our open order demand was, or what inventory was coming in to the company. We were making decisions based on summary-level data that was often times weeks or months stale. We really didn’t know how we were doing at a granular level, and more importantly what was driving that performance.”
Blake Hacker, SmartLabs
Smarthome is one of the world’s largest home automation retailers, becoming an easy-to-use source for thousands of affordable lighting, security, and home entertainment products that the average do-it-yourselfer can safely install.
Blake Hacker is the Financial Controller at SmartLabs, Inc., the parent company of Insteon, a networking technology for the connected home, and Smarthome, one of the world’s largest home automation retailers.
Blake hit the wall with desktop software when his first ecommerce company had a QuickBooks file that got too big. Blake reminisces, “Once your QuickBooks file gets too big — even if you’re on QuickBooks Enterprise — once it’s over about 2 gigs, it crashes. And if you’ve got a crashed accounting system, you’re basically dead in the water.”
The Benefits of Moving to Cloud ERP
For Blake, the switch to cloud accounting & ERP allowed his company to automate much of the transaction flow that had previously required manual data entry. Smartlabs is on Magento for for their ecommerce website, which is integrated with NetSuite, their ERP.
He uses a connector tool called FarApp to sync their ERP to Magento as well as to third-party marketplaces such as Amazon, Newegg, and Sears.com. And for wholesale channels such as Costco and Home Depot, Blake uses a solution called B2B Gateway that provides an EDI connection.The result of these ERP integrations means that, as Blake says, “transaction flow is automatic. We reduced a lot of manual data entry.”
Additionally, the switch to cloud ERP made Smartlabs’ move to a new warehouse easier when their lease was up. Blake says, “switching to a cloud ERP helped facilitate that move. With the transfer to NetSuite, we were able to outsource our website fulfillment to a third party logistics company (a 3PL warehouse). Because we’re cloud-based, we can push orders through the cloud, they’ll fulfill them, and they’ll send a file back and that allows us to manage that process in an automated fashion. Inventory replenishment is much faster and we get much better data.”
On the budgeting and forecasting side, Smartlabs is using Adaptive Insights for planning, which streamlines the work for Smartlabs’ controller. Blake says, “I can push out various budgets to individuals who can work on their budgets concurrently. I’m not sending out a million spreadsheets around and trying to figure out which one is the latest version.”
Blake continues, “I’ve added a lot of custom fields. I can run searches to get KPIs such as how many bills were entered each week or each month, and how many were exception POs or invoices. I can run those reports against industry standard benchmarks to make sure we’re best-in-class. And I can see the volume increase or decrease, and hold people accountable. Overall I get better financials. They’re much cleaner, and I have more visibility to inventory.”
NetSuite has also made reporting a lot easier. “Sales tax — I built some custom reports for that,” says Blake. “That used to take hours. It now takes me maybe 15 to 20 minutes. It used to take probably two, three days to do all the reporting for royalties. Now I can do it in 20 to 30 minutes.”
That’s a lot of benefits, but one of the biggest impacts has been on the staffing and efficiency of the accounting team. Previously, it was six people. After restructuring, says Blake, “it’s now a team of three or four doing everything: AR, AP, month-end close, financial reporting — all that.” This saves not just time, but also on salary expense. Additionally, improved efficiency allows for greater data analysis as well as the redistribution of resources to other more critical areas of the business.
Danny Coorsh, of Sugarfina, isn’t in accounting, but says he’s in a similar boat on the operations side when it comes to hiring. Implementing cloud accounting has allowed him to scale with the company’s growth without adding to the headcount until just recently with one hire.
“Last year we did over $40 million in sales,” says Danny. “By the end of the year we had 40 retail boutiques operating in two countries and I was the only NetSuite resource in the company. To be able to scale to that degree with just a single person managing our ERP and back-end systems speaks to cloud systems’ ease of use and immense potential value. These systems don’t just allow us to get through our basic accounting tasks, they provide operational visibility and a platform for building business processes that directly enable our success.”
Amy Pool says that Thrive Market is leveraging their cloud ERP to improve planning regarding inventory. “We’ve recently introduced a vendor portal,” she says. “Our vendors can log in to the portal, see what shipments we’ve received at our warehouses, and submit their invoices. Now we’re implementing demand planning technology that will plug into NetSuite. We’re looking at what else we can do to leverage the ERP to help scale operations as we grow the business.”
For Amy, another big benefit of moving to cloud is more control in the financial close process. Thrive Market implemented NetSuite in August 2016, followed by FloQast in February 2017.
Amy is very happy with the FloQast integration with NetSuite. She says, “I like being able to see when updates to the GL balance in NetSuite get pulled into FloQast right away. That helps me identify when when balances have changed in the ERP, but our workpapers that are saved on in our shared drive have not yet been updated. Before FloQast we were using a spreadsheet. That doesn’t do anything automated to pull in your balances. So then you’re stuck manually checking that your schedule agrees with NetSuite. We would miss things. Integrating NetSuite and FloQast helps keep our records in order so that we always have everything documented to support those balances on our GL.”
FloQast and NetSuite in tandem have also helped speed up the close at Thrive Market. Amy says, “Before FloQast we were closing in eight to ten days. At this point we’re down to about seven from start to finish. But the bulk of what needs to get done is now done in four or five days.”
Stay tuned for part two in this series, in which our panelists will share lessons learned on their journeys to cloud ERP, including how to avoid failed ERP implementations.